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Plaintiffs' Lawsuits Against Companies Sharply Decline
Court Rulings, Legislators Curb Asbestos, Silicosis Claims;
Indicted Firm Cuts Filings;  Questioning 'Jackpot Justice'
By Paul Davies
The Wall Street Journal
Saturday, August 26, 2006


Companies involved in many of the largest and most controversial legal clashes of recent decades are seeing a sharp decline in the number of lawsuits filed against them.

In recent months, judges have dismissed or challenged tens of thousands of individual cases, in matters ranging from claims of lung damage from asbestos and silica dust to allegations that the diet drug fen-phen caused heart problems.  Moreover, fewer new claims like these are being launched, as state and federal courts and legislators attack the methods used by some attorneys to round up plaintiffs for large-scale litigation.

There is no comprehensive count of claims, but a look at several key areas -- particularly asbestos and silica claims -- shows large-scale litigation against single products, known as "mass torts" and "class actions," is on the wane.

"The future of mass torts and class actions is very much in question," said Geoffrey Miller, a New York University School of Law professor who teaches a course on issues in large-scale litigation.

This year, new securities-fraud class-action lawsuits are down 45%, to 61 through June from 111 in the first half of 2005, according to a new study.

Among the factors behind that drop:  the federal indictment in May of the leading securities class-action law firm, Milberg Weiss Bershad & Schulman LLP, which is accused of paying individuals to file suits.  The firm filed just 17 lawsuits in the first six months of 2006, down from 55 in 2005's first half -- and hasn't filed a class-action case since its indictment.

Another contributor is a federal judge's finding last year that nearly 10,000 claims of lung damage from silica dust "were manufactured for money."  The case involved 200 companies that manufactured or used silica, which causes an incurable disease of the lungs known as silicosis caused by overexposure to silica dust, which is found in sand and rock and most commonly affects construction workers.

Silicosis claims have soared this decade;  for instance, one top manufacturer, U.S. Silica Co., had seen claims against it spike to almost 20,000 in 2003 from just a few hundred in previous years.  But after defense attorneys raised questions, U.S. District Judge Janis Jack, appointed to the bench by President Clinton, found plaintiffs were being recruited even though they likely had suffered no harm.  She sent all but one case back to state courts, where many have since been dropped.

The decision has had a major chilling effect on litigation involving both silicosis and asbestos, which features many of the same plaintiffs' lawyers, doctors and even plaintiffs.  About 60% of the plaintiffs in the silica case had previously been plaintiffs in asbestos suits, even though it is extremely rare to get both silicosis and asbestos.  One doctor has made roughly 88,000 asbestos diagnoses over the years and diagnosed about 70% of the 10,000 silicosis cases that Judge Jack found fraudulent.  Her ruling also prompted congressional hearings and state and federal criminal investigations.

The recent shift comes after decades in which trial lawyers followed a tried-and-true strategy:  Recruit lots of plaintiffs, then pressure companies to agree to a cash settlement in order to avoid a long, costly court battle.  Law firms typically pocketed up to a third of any resulting settlement.

Litigation against manufacturers of asbestos has been a particularly crowded arena.  More than 700,000 claims have been filed against more than 8,000 companies in recent decades, leading to more than $70 billion in payouts and legal bills.  Those expenses have forced dozens of companies into bankruptcy.

Many claims are legitimate.  Asbestos is a fire-retardant mineral that was widely used as insulation and in auto parts until the 1970s, but was banned after the inhalation of asbestos fibres was linked to cancer and other diseases.  About 4,000 people a year die from mesothelioma, cancer of the membrane around the lungs, caused by asbestos, according to the World Health Organization.

But critics say the mass-litigation system gives law firms an incentive to aggressively recruit plaintiffs with dubious claims, cutting into funds left for people who were truly harmed.

"The game for plaintiffs' attorneys is:  Seek out doctors willing to diagnose a problem where the vast majority of doctors would not," says Richard Nagareda, a professor at Vanderbilt University Law School.  Judge Jack's silicosis opinion "really lifted the curtain," he says.

Plaintiffs' attorneys counter that the argument is a smokescreen designed to make it harder for individuals to hold companies accountable for bad behavior.  While many plaintiffs may not currently be impaired from their exposure to asbestos, they point out, cancers and other diseases can take years to develop.

Mark Lanier, a plaintiffs' attorney not involved in the asbestos and silicosis litigation, says the actions of a few aggressive lawyers has fueled the perception that all plaintiffs' attorneys are "ambulance chasers."

A spokeswoman for the primary professional group for trial lawyers says pro-business groups are using isolated incidents to "distract attention" from efforts by businesses to "evade responsibility" for harming individuals.  "If there are doctors or lawyers misusing the civil-justice system, they should be held accountable," says the spokeswoman, Chris Mather.  "I would say the biggest problem is the negligence of big corporations."

Her group, the Association of Trial Lawyers of America, voted last month to change its name to the American Association for Justice because of the negative image of the term "trial lawyers."

In recent years, legislators have taken aim at the tide of litigation.  Earlier this year, Congress passed a tort-overhaul bill that makes it easier to move many class-actions out of state courts and into federal court, where judges are more likely to dismiss dubious claims.  The law applies only to class-action lawsuits, or those in which many hundreds or thousands of individual claims are merged into one case, so it doesn't affect cases pursued individually, such as the majority of asbestos and silicosis suits.

Meanwhile, several states, including Florida, Georgia and Texas, have passed so-called medical-criteria bills, which require a treating physician to certify a claimant has been harmed by asbestos or silica, and not simply exposed, before a lawsuit can proceed.

In Mississippi -- a state that that developed a reputation for what became known in the legal community as "jackpot justice" due to sizeable damage awards -- lawmakers passed a legal-overhaul measure in 2004 that placed caps on punitive damages and made it difficult to shop for friendly courts.

Other court rulings also have cut down on cases.  In April, state-court judges in Ohio threw out about 3,000 asbestos claims after the screening doctors, some of whom also had been involved in the silicosis litigation, refused to testify, asserting their Fifth Amendment right against self-incrimination.  Another 35,000 asbestos cases, in which plaintiffs had been diagnosed by the same doctors, were put aside until they could get diagnoses from other doctors.

In June, defense attorneys filed a motion in federal court in Philadelphia seeking to have more than 100,000 asbestos cases, some involving the same doctors, dismissed.

Mississippi's state Supreme Court has issued several rulings in recent years that have made it tougher for plaintiffs.  One, for instance, prevents the "bundling" of several plaintiffs into one lawsuit, a technique that can be used to tie weaker claims to a stronger case.  Another decision requires that plaintiffs live in the state or show that they suffered harm while in the state before they can file a claim there.

The broadside against the silicosis and asbestos litigation may have altered the landscape for thousands of welders who claim that longtime exposure to toxic fumes from welding rods causes neurological injuries such as tremors and paralysis.  Such lawsuits once were considered the next class-action wave, but plaintiffs have lost the first 11 of 12 cases that have gone to trial, and 1,600 suits have been dismissed.

Still, about 10,000 cases are pending in state and federal court.  And a federal judge in April denied a motion by defense attorneys to dismiss thousands of claims for medical fraud, ruling that plaintiffs' attorneys used a "robust" screening process to "weed out" questionable claims.

The maker of fen-phen, the diet drug withdrawn from the market because it could cause heart damage, also has had some success having suits thrown out.  The U.S. Attorney in Mississippi has prosecuted 26 people for filing false or fraudulent claims against the company, American Home Products, which has changed its name to Wyeth.  A lawyer who represented some plaintiffs was indicted for filing false claims.  Federal prosecutors in Philadelphia, where dozens of fen-phen cases were tossed out, have launched a criminal probe into some suits, say people close to the matter.

Despite the tougher landscape, plaintiffs' lawyers are pushing ahead with a number of large-scale new actions.  Wyeth, for one, faces a new round of litigation involving a hormone-replacement-therapy drug, Prempro.  Opening arguments were held this past week in federal court in Arkansas in the first of 5,000 cases alleging Wyeth ignored signals that Prempro could increase risk of breast cancer, heart disease and stroke.  Prempro is a widely prescribed estrogen-progestin combination used to treat pre-menopausal symptoms, such as hot flashes and night sweats.

Meantime, Merck & Co. still faces more than 14,000 lawsuits alleging its painkiller Vioxx caused heart attacks and strokes.  Legal observers say Merck's decision to fight each Vioxx case individually, rather than to try and reach a quick settlement, was triggered in part by the rising tide of dismissals of claims in other cases.

It remains to be seen if the drug maker's strategy will work.  Fighting individual cases has the potential to be costly.  Merck has won some initial cases, but has also suffered several stinging defeats, including verdicts against it in two individual cases of $253 million and $51 million.

Still, analysts estimate that by fighting cases, Merck has been able to reduce the number of estimated claims to around 40,000 from 100,000 by discouraging some potential plaintiffs and lawyers.  Analysts also have lowered estimates of the company's likely total liability to $25 billion or less compared with as much as $50 billion last year, soon after Merck pulled the drug from the market.

Write to Paul Davies at paul.davies@wsj.com

http://online.wsj.com/article/SB115655512774246275.html?mod=hps_us_pageone